What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-15 compared with 2023-03-09 · 334 added, 192 removed, 901 unchanged (37% of the section changed)

5 unchanged sentences

Our management’s report on internal control over financial reporting procedures (as defined in Rule 13a-15(f) under the Exchange Act) is included with the financial statements reflected in Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.

Attestation Report of the Registered Public Accounting Firm

WithumSmith+Brown, PC, the independent registered public accounting firm that audited the financial statements of included in Item 8 of this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2022.

This report is included with the financial statements included in Item 8 of this Annual Report on Form 10-K and incorporated herein by reference.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the fiscal quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

No changes in our internal controls over financial reporting occurred during the fiscal quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Other Information.

4 unchanged sentences

To the extent required, information required to be disclosed by this Item about the Section 16(a) compliance of our directors and executive officers is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” contained in our definitive proxy statement for our 2024 annual meeting of stockholders scheduled to be held on June 6, 2024, which we intend to file within 120 days of the end of our fiscal year.

Information required to be disclosed by this Item about our board of directors, the audit committee of our board of directors, our audit committee financial expert, our Code of Business Conduct and Ethics, and other corporate governance matters is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Board of Directors and Corporate Governance Matters” contained in our definitive proxy statement for our 2023 annual meeting of stockholders scheduled to be held on June 6, 2023, which we intend to file within 120 days of the end of our fiscal year.

Information required to be disclosed by this Item about our Board of Directors, the Audit Committee, our Audit Committee financial expert, our Code of Business Conduct and Ethics, and other corporate governance matters is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Board of Directors and Corporate Governance Matters” contained in our definitive proxy statement for our 2024 annual meeting of stockholders scheduled to be held on June 6, 2024, which we intend to file within 120 days of the end of our fiscal year.

The text of our Code of Business Conduct and Ethics, which applies to our directors and employees (including our principal executive officer, principal financial officer, and principal accounting officer or controller, and persons performing similar functions), is posted in the “Corporate Governance” section of our website, www.cytosorbents.com.

26 unchanged sentences

Description of Capital Stock of CytoSorbents Corporation (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed on March 10, 2022).

Form of Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on December 11, 2023).

Amended and Restated Employment Agreement, dated as of July 30, 2019, by and between CytoSorbents Medical, Inc.

8 unchanged sentences

Robert Bartlett Effective as of January 1, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 9, 2016).

Lease Agreement between Princeton Corporate Plaza LLC and the Registrant dated as of March 9, 2000 (incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K filed on March 31, 2015).

Third Amendment to Lease Agreement between Princeton Corporate Plaza LLC and the Registrant dated as of December 12, 2014 (incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K filed on March 31, 2015).

Fourteenth Amendment to Lease Agreement by and between the Registrant and Princeton Corporate Plaza, LLC, dated April 1, 2016 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 9, 2016).

Amended and Restated Fourteenth Amendment to Lease Agreement by and between the Registrant and Princeton Corporate Plaza LLC, dated August 5, 2016 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 9, 2016).

Eighteenth Amendment to Lease Agreement by and between the Registrant and Princeton Corporate Plaza, LLC, dated January 4, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 6, 2019).

Royalty Agreement between Guillermina Vega Montiel and the Registrant dated as of August 11, 2003 (incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K filed on March 31, 2015).

Assignment and Assumption of Certain Royalty Rights, dated as of November 22, 2022, by and among Robert Shipley Living Trust, ROKK, LLC, and CytoSorbents Medical, Inc.

Assignment and Assumption of Certain Royalty Rights, dated as of November 22, 2022, by and among Robert Shipley Living Trust, ROKK, LLC, and CytoSorbents Medical, Inc (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed on March 9,2023).

Stipulated Order and Settlement Agreement between Bro-Tech Corporation, Purolite International Ltd.

28 unchanged sentences

Sixth Amendment to the Amended and Restated Loan and Security Agreement, dated as of March 8, 2023, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank.

and Western Alliance Bank (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K filed on March 9,2023).

Seventh Amendment to the Amended and Restated Loan and Security Agreement, dated as of May 16, 2023, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 1, 2023).

Consulting Agreement, dated March 31, 2023, by and between the Company and Ms.

Bloch (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2023).

Employment Agreement, dated September 18, 2023, by and between the Company and Ms.

Kathleen Bloch (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 19, 2023).

Securities Purchase Agreement, dated as of December 11, 2023, by and among CytoSorbents Corporation and the investors party thereto (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 11, 2023).

List of Subsidiaries.

4 unchanged sentences

Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Compensation Recoupment Policy

The following materials from CytoSorbents Form 10-K for the fiscal year ended December 31, 2023, formatted in Extensible Business Reporting Language (XBRL):

18 unchanged sentences

(Principal Financial and Accounting Officer)

/s/ Michael G.

Chairman of the Board

3 unchanged sentences

March 14, 2024

/s/Michael G.

March 14, 2024

17 unchanged sentences

Based on this evaluation, management concluded that internal control over financial reporting was effective as of December 31, 2023.

WithumSmith+Brown, PC , the independent registered public accounting firm that audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K, was engaged to audit our internal controls over financial reporting.

Their report appears on page F-3.

/s/ Kathleen P.

5 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders,

To the Board of Directors and Stockholders of

Cytosorbents Corporation:

Opinion on the Consolidated Financial Statements and Internal Control Over Financial Reporting

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Cytosorbents Corporation (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report on internal control over financial reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Cytosorbents Corporation as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming that the entity will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the entity has suffered recurring losses from operations, has experienced cash used from operations, and has an accumulated deficit, which raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our opinion is not modified with respect to this matter.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to Cytosorbents Corporation in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Cytosorbents Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Stock Based Compensation

Description of the Matter

As discussed in Notes 2 and 11 of the consolidated financial statements, the Company grants stock-based awards including stock options, restricted stock units and performance-based stock awards to their employees, board of directors, and consultants as compensation for their service.

As discussed in Notes 2 and 11 to the consolidated financial statements, the Company grants stock-based awards including stock options, restricted stock units and performance-based stock awards to their employees as compensation for their service.

The Company recorded approximately $3,329,000 of stock-based compensation expense during the year ended December 31, 2023.

Certain awards include performance conditions that only vest if those conditions are met, and the quantity of awards received can range based on the level of performance achieved.

In 2022, the Company granted 2,528,800 of such awards and recorded stock-based compensation expense related to these performance awards of approximately $180,440.

In 2023, the Company granted 1,227,750 performance awards, and recorded stock-based compensation expense of approximately $354,000 related to these awards.

The number of shares awarded are contingent on certain performance metrics, and the quantity of awards received can range based on the level of performance achieved.

Auditing the Company’s accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the subjectivity of assumptions used to value stock-based awards and the frequent use of performance-based vesting conditions.

1 unchanged sentence

How we Addressed the Matter in our Audit

Addressing the matter involved obtaining an understanding, evaluating the design and testing the operating effectiveness of controls over the Company’s process for determining stock-based compensation expense, including testing management’s review controls over the underlying calculations, the significant assumptions used in valuing certain awards, identification of the terms of the performance conditions and the key inputs used in determining the outcome of each performance condition.

Addressing the matter involved obtaining an understanding of and evaluating the design of controls over the Company’s process for determining stock-based compensation expense, including management’s review controls over the underlying calculations, the significant assumptions used in valuing certain awards, identification of the terms of the performance conditions and the key inputs used in determining the outcome of each performance condition.

We assessed the appropriateness of judgments made by management in determining key assumptions related to the awards.

1 unchanged sentence

Additionally, we tested the related valuation report on volatility prepared by the Company’s specialists by involving our internal valuation specialists to assess the valuation methodologies and assumptions used.

We determined whether performance targets were satisfied in accordance with the contractual conditions through review of source documents, press releases, and board minutes and recalculated grant date fair value by multiplying the awarded quantity of awards by the grant price.

We sampled a selection of grants and recalculated the fair value of those grants without exception.

Further, we sampled a selection of grants and recalculated the stock compensation expense recorded as of December 31, 2023.

We also evaluated the adequacy of the Company’s stock-based compensation disclosures included in Notes 2 and 11 in relation to this matter.

8 unchanged sentences

Cash and cash equivalents

Grants and accounts receivable, net of allowance for doubtful accounts of $ 76,041 and $ 60,539 at December 31, 2022 and 2021, respectively

Grants and accounts receivable, net of allowances of $ 49,663 and $ 76,041 at December 31, 2023 and 2022, respectively

Prepaid expenses and other current assets

8 unchanged sentences

Lease liability – current portion

Current maturities of long-term debt

Total current liabilities

Lease liability, net of current portion

Long-term debt

Long-term debt, net of current maturities

Total Liabilities

29 unchanged sentences

Other income (expense):

Interest (expense), net

( 1,201,067 )

Interest income (expense), net

Gain (loss) on foreign currency transactions

1 unchanged sentence

( 2,577,913 )

Miscellaneous expense

Miscellaneous income (expense)

Total other income (expense), net

33 unchanged sentences

( 1,734,078 )

( 196,626,647 )

Stock-based compensation - employees, consultants and directors

6 unchanged sentences

( 24,558,648 )

( 7,837,188 )

Balance at December 31, 2021

( 221,185,295 )

( 196,626,647 )

Stock-based compensation - employees, consultants and directors

Issuance of common stock - offerings, net of fees incurred

Legal/audit fees related to ATM offering

Issuance of restricted stock options

Proceeds from exercise of stock options

Cashless exercise of stock options

Other comprehensive income, foreign currency translation adjustment

Other comprehensive loss, foreign currency translation adjustment

Stock issued to vendor in lieu of cash payment

( 32,812,583 )

3 unchanged sentences

Stock-based compensation - employees, consultants and directors

Legal/audit fees related to ATM offering

Proceeds from the exercise of stock options for cash

Issuance of common stock offerings, net of fees incurred

Issuance of restricted stock options

Other comprehensive loss, foreign currency translation adjustment

Stock issued to vendor in lieu of cash payment

( 1,799,874 )

( 28,507,394 )

Balance at December 31, 2023

8 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Accrued final fee

Non-cash compensation

7 unchanged sentences

Stock-based compensation

Amortization of loan acquisition costs

Changes in operating assets and liabilities:

3 unchanged sentences

Prepaid expenses and other current assets

( 1,076,849 )

Accounts payable and accrued expenses

11 unchanged sentences

( 4,281,261 )

( 1,676,218 )

Cash flows from financing activities:

Proceeds from long-term debt

Repayment of long-term debt

( 16,410,900 )

Final fee on long-term debt

Payment of loan acquisition costs

Equity contributions - net of fees incurred

Proceeds from exercise of stock options

Proceeds from exercise of warrants

Net cash provided by financing activities

3 unchanged sentences

( 29,993,140 )

( 17,596,435 )

Cash, cash equivalents and restricted cash at beginning of year

12 unchanged sentences

The accompanying consolidated financial statements include the results of CytoSorbents Corporation (the “Parent”), CytoSorbents Medical Inc., its wholly owned operating subsidiary (the “Subsidiary”), and CytoSorbents Europe GmbH, its wholly owned European subsidiary (the “European Subsidiary”).

In addition, the consolidated financial statements include CytoSorbents Switzerland GmbH, CytoSorbents Poland Sp.

z.o.o., CytoSorbents Medical UK Limited, and CytoSorbents France SAS, the wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited, a wholly owned subsidiary of CytoSorbents Medical, Inc.

In addition, the consolidated financial statements include CytoSorbents Switzerland, CytoSorbents Poland Sp.

z.o.o., CytoSorbents Medical UK Limited, and CytoSorbents France SAS, the wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited and CytoSorbents India Private Limited, wholly-owned subsidiaries of CytoSorbents Medical, Inc.

These entities are collectively referred to as the “Company”.

In years prior to December 31, 2020, the Company’s consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

As of December 31, 2022, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 23.8 million, which the Company expects will fund the Company’s operations beyond twelve months from the issuance of these consolidated financial statements.

As a result, the Company has determined that the going concern risk has been substantially mitigated.

As of December 31, 2023, the Company’s total cash and cash equivalents were approximately $ 15.6 million, including approximately $ 14.1 million in cash and cash equivalents and approximately $ 1.5 million in restricted cash, which is not expected to fund the Company’s operations beyond the next twelve months from the issuance of these consolidated financial statements.

This matter raises substantial doubt about the Company’s ability to continue as a going concern.

As a result, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company is actively pursuing financing sources, including less or non-dilutive debt financing, royalty financing, strategic or direct investments, equity financing, and/or combinations thereof.

There can be no assurance that management will be successful in these endeavors.

PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

10 unchanged sentences

In the third quarter of 2019, the Company formed CytoSorbents UK Limited, a wholly owned subsidiary of CytoSorbents Medical, Inc., which is responsible for the management of the Company’s clinical trial activities in the United Kingdom.

In March 2022, the Company formed CytoSorbents Medical UK Limited to provide marketing and direct sales services in the United Kingdom and the Republic of Ireland.

In October 2022, the Company formed CytoSorbents France SAS to provide marketing and direct sales services in France.

In March 2022, the Company formed CytoSorbents Medical UK Limited to provide marketing and direct sales services in the United Kingdom and the Republic of Ireland, a wholly-owned subsidiary of CytoSorbents Europe, GmbH.

In October 2022, the Company formed CytoSorbents France SAS, a wholly-owned subsidiary of CytoSorbents Europe, GmbH, to provide marketing and direct sales services in France.

In May 2023, the Company formed CytoSorbents India Private Limited to provide marketing and direct sales services in India.

CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011 and is currently being marketed and distributed in more than 75 countries around the world, as an effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” or “cytokine release syndrome” seen in critical illnesses that may result in massive inflammation, organ failure, and patient death.

10 unchanged sentences

In July 2021, the Company received full approval of its Investigative Device Exemption (“IDE”) to conduct the pivotal STAR-T (Safe and Timely Antithrombotic Removal – Ticagrelor) double-blind randomized control trial (“RCT”) for up to 120 patients in the United States to support FDA marketing approval.

In July 2023, the Company announced that enrollment in the STAR-T trial has completed, and in August 2023, the Company announced completion of the STAR-T trial, following the last scheduled patient follow-up.

In December 2023, the Company announced that the independent Data Safety Monitoring Board (the “DSMB”) performed a final review of the full unblinded data on all 140 patients in the STAR-T trial and concluded there were no issues with device safety, meeting the primary safety endpoint of the study.

The Company has also performed the initial data analysis on the primary effectiveness endpoint of STAR-T trial.

Based on this analysis, the study did not meet the primary effectiveness endpoint in the overall patient population that underwent different types of cardiac surgeries.

However, the study did demonstrate evidence of reduced bleeding complications in patients in the pre-specified isolated coronary artery bypass graft (“CABG”) surgery population, representing more than 90% of the overall study population.

The Company expects to complete the analysis of the full trial results during the first quarter of 2024.

Pending this final analysis, the Company believes the safety and effectiveness data from STAR-T will support the regulatory submission of DrugSorb-ATR to the U.S.

FDA and Health Canada.

In August 2021, the Company announced that it was granted a second Breakthrough Device designation for its DrugSorb-ATR Antithrombotic Removal System by the FDA.

1 unchanged sentence

In October 2021, the Company also received full FDA approval of an IDE application to conduct a double-blind, randomized, controlled clinical study for up to 120 patients entitled, “Safe and Timely Antithrombotic Removal – Direct Oral Anticoagulants (STAR-D),” in the United States to support FDA marketing approval.

If FDA marketing approval is obtained for either the removal of ticagrelor or direct oral anticoagulants indications, the device would be marketed as DrugSorb-ATR in the United States.

If FDA marketing approval is obtained for either the removal of ticagrelor or direct oral anticoagulants indications, the device will be marketed as DrugSorb-ATR in the United States.

The DrugSorb-ATR Antithrombotic Removal System is based on the same polymer technology as CytoSorb.

In May 2022, the Company announced that the Company entered into a 3-year preferred supplier agreement with Asklepios, making CytoSorb available without restrictions to all of the approximate 170 healthcare facilities across 14 states throughout Germany at which Asklepios operates.

In May 2022, the Company announced that the Company entered into a three-year preferred supplier agreement with Asklepios, making CytoSorb available without restrictions to all of the approximately 170 healthcare facilities across 14 states throughout Germany at which Asklepios operates.

This includes Asklepios Klinik St.

4 unchanged sentences

The Company will also be able to provide field support services in these countries.

In September 2023, the distribution agreement with Nikkiso expired, and the Company indicated that it would not seek renewal of the agreement.

The Company is actively working with a new supplier to provide a stand-alone hemoperfusion pump.

In August 2022, the Company entered into a Marketing Agreement (the “Marketing Agreement”) with Fresenius Medical Care Deutschland GmbH (“Fresenius”), which expands the Company’s strategic partnership with Fresenius by establishing a multi-stage global collaboration to combat life-threatening diseases in critical care.

2 unchanged sentences

Compared to the prior co-marketing agreement between the parties, the Marketing Agreement intends to increase the commitments from both parties and to ensure an ongoing and consistent level of marketing and promotional activity specifically focused around CytoSorb, where Fresenius will actively market and promote CytoSorb as the featured blood purification therapy for removal of cytokines, bilirubin, and myoglobin on its critical care platforms.

Specifically, the Marketing Agreement provides that various Fresenius-led in-person, virtual, social media, and web-based marketing programs and events will feature the CytoSorb therapy and highlight the cooperation between the two companies in the field of critical care during the Term.

Specifically, the Marketing Agreement provides that various Fresenius-led in-person, virtual, social media, and web-based

marketing programs and events will feature the CytoSorb therapy and highlight the cooperation between the two companies in the field of critical care during the Term.

To help support the increased marketing and promotional efforts of the expanded collaboration, CytoSorbents has agreed to subsidize a portion of the marketing costs through a royalty payment to Fresenius Medical Care based on CytoSorb sales in the intensive care unit on Fresenius Medical Care platforms, excluding the United States.

1 unchanged sentence

The Marketing Agreement also includes the certification of compatibility of CytoSorb for usage on Fresenius’ current critical care platforms.

Certain initial activities have been completed with the formal launch of this program expected to occur sometime in 2023.

The launch of this program is expected to occur in 2024.

The technology is based upon biocompatible, highly porous polymer sorbent beads that can actively remove toxic substances from blood and other bodily fluids by pore capture and surface adsorption.

The Company has numerous products under development based upon this unique blood purification technology, which is protected by 18 issued U.S.

The Company has numerous products under development based upon this unique blood purification technology which, as of December 31, 2023, is protected by 19 issued U.S.

patents and multiple international patents, with applications pending both in the U.S.

9 unchanged sentences

In addition, the consolidated financial statements include CytoSorbents Switzerland GmbH, CytoSorbents Poland Sp.

z.o.o., CytoSorbents Medical UK Limited and CytoSorbents France SAS, wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited, a wholly owned subsidiary of CytoSorbents Medical, Inc.

z.o.o., CytoSorbents Medical UK Limited and CytoSorbents France SAS, wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited and CytoSorbents India Private Limited, wholly-owned subsidiaries of CytoSorbents Medical, Inc.

All significant intercompany transactions and balances have been eliminated in consolidation.

11 unchanged sentences

Restricted Cash

The Company’s total restricted cash in the amount of $ 1,687,459 consists of cash of $ 1,467,459 that the Company is obligated to maintain as collateral for the outstanding letter of credit with Bridge Bank that was provided to the landlord of the College Road facility as security and cash of $ 220,000 that the Company is obligated to maintain as collateral for the credit limit on the Company’s credit card account.

Grants and Accounts Receivable

Grants receivable represent amounts due from U.S.

government agencies and are included in grants and accounts Receivable in the accompanying consolidated balance sheets.

Accounts receivable are unsecured, non-interest-bearing customer obligations due under normal trade terms.

The Company sells its devices to various hospitals and distributors.

The Company performs ongoing credit evaluations of customers’ financial condition.

Management reviews accounts receivable periodically to determine collectability.

Balances that are determined to be uncollectible are reserved in the allowance for doubtful accounts.

The Company’s total restricted cash in the amount of $ 1,483,958 and $ 1,687,459 as of December 31, 2023 and 2022, respectively, consisted of cash of $ 1,467,459 for each year that the Company is obligated to maintain as collateral for the outstanding letter of credit with Bridge Bank that was provided to the landlord of the College Road facility as security and cash of $ 16,499 and $ 220,000 as of December 31, 2023 and 2022, respectively, that the Company is obligated to maintain as collateral for the credit limit on the Company’s credit card account.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable consist of amounts due from direct customers, distributors and agencies of the U.S.

government and are presented at net realizable value.

At each balance sheet date, the Company estimates an expected allowance for credit losses inherent in the Company’s accounts receivable portfolio based on historical experience, specific allowances for known troubled accounts, and other available evidence.

In addition, also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded.

This estimate is calculated on a pooled basis where similar risk characteristics exist.

The Company has identified the following portfolio segments:

direct customers, distributors/strategic partners and the U.S.

A fixed reserve percentage for each pool is derived from a review of the Company’s historical losses in relation to the total pool.

This estimate is adjusted quarterly for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company.

The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company’s portfolio segments have remained constant over the Company’s historical evaluation period.

The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery.

If any recoveries are made from any accounts previously written off, they are recognized as an offset to credit loss expense in the year of recovery.

The total amount of write-offs was immaterial to the financial statements as a whole for the year ended December 31, 2023.

The allowance for credit losses reflects accounts receivable balances that are written off when management determines they are uncollectible.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist, and measures the allowance for credit losses using the following methods:

Direct Customers—The Company measures expected credit losses on direct customer receivables using an aging methodology.

The risk of loss for direct customer receivables is low based on the Company’s historical experience.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and supportable forecasts.

Distributors/Strategic Partners—The Company measures expected credit losses on distributor receivables using an individual reserve methodology.

The risk of loss in this portfolio is low based on the Company’s historical experience.

The estimate of expected credit losses considers the past payment history of each distributor.

Government- These receivables are related to the Company’s government grants.

The Company measures expected credit losses on these receivables using an individual reserve methodology.

The risk of loss in this portfolio is very low based on the Company’s historical experience, as these receivables are supported by approved grant award contracts.

Inventories are valued at the lower of cost or net realizable value.

2 unchanged sentences

Devices used in clinical trials or for research and development purposes are removed from inventory and charged to research and development expenses at the time of their use.

In September 2022, the Company experienced an equipment failure of a refrigeration unit at its new College Road manufacturing facility.

This equipment stored various items of work-in-process inventory.

The Company determined all the items that were stored in this unit were required to be scrapped.

The value of this inventory was approximately $ 599,000 .

Accordingly, this inventory was written off and was included in cost of goods sold at the time of the loss in September 2022.

The Company filed a claim with its insurance carrier related to this loss.

In December 2022, the claim was approved in the amount of approximately $ 299,000 and, accordingly, has been recorded as a reduction to cost of goods sold in the accompanying consolidated statement of operations and comprehensive loss.

Donated devices are removed from inventory and charged to selling, general and administrative expenses.

Property and Equipment

10 unchanged sentences

For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value.

During the year ended December 31, 2022, the Company wrote-off patent costs of approximately $ 636,000 related to the impairment of certain issued patents and pending patent applications in certain specific jurisdictions, the abandonment of certain patent defense costs that are no longer being pursued and the abandonment of certain pending patent application costs in the ordinary course of business.

During the years ended December 31, 2023 and 2022, the Company wrote-off patent costs of approximately $ 656,000 and $ 636,000 , respectively, related to the impairment of certain issued patents and pending patent applications in certain specific jurisdictions and the abandonment of certain pending patent application costs in the ordinary course of business.

This charge is included in legal, financial and other consulting in the consolidated statements of operations and comprehensive loss.

Revenue Recognition

Product Sales:

Revenues from sales of products to both direct and distributor/strategic partner customers are recognized at the time when control passes to the customer, in accordance with the terms of their respective contracts.

Recognition of revenue occurs as each performance obligation is completed.

Grant Revenue:

Revenue from grant income is based on contractual agreements with various agencies of the U.S.

Certain agreements provide for reimbursement of costs, other agreements provide for reimbursement of costs and an overhead margin and certain agreements are performance based, where revenue is earned based upon the achievement of milestones outlined in the contract.

Revenues are recognized when the associated performance obligation is fulfilled.

Costs are recorded as incurred.

Amounts invoiced in excess of costs actually incurred on fixed price contracts are classified as deferred revenue and are included in accrued expenses and other current liabilities in the consolidated balance sheets.

Costs subject to reimbursement by these grants have been reflected as costs of revenue.

Revenue is recognized when the Company ships its products to its direct customers and distributors/strategic partners.

Revenue is recognized on its grant awards with agencies of U.S.

government in accordance with the terms of the award contract.

See Note 3 for a description of the types of government contracts.

The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for the products shipped or the services provided under their grant contracts.

To achieve this core principle, the Company applies the following five steps:

Identify Contracts with Customers - The Company’s contracts with its direct customers are generally in the form of a purchase order.

The Company has formal written contracts with each of its distributors/strategic partners that define their respective territories and minimum purchase commitments which must be met in order to maintain exclusivity in their territory.

Distributors/strategic partner customers also submit purchase orders with each order that define the terms of shipment and transaction price.

The Company has a contract for each grant award with various agencies of the U.S.

Identify Performance Obligations - The performance obligations in contracts with direct customers and distributors/strategic partners are for the shipment of the CytoSorb device and related accessory parts.

The performance obligations for government contracts are dependent on the contract type, however, these are generally based on the costs incurred related to each government contract.

Determine Transaction Price - The price charged is based on the Company’s price list for the CytoSorb device and related accessory parts for both direct customers and distributor/strategic partners.

The Company does not permit returns for product sales.

The Company also provides for certain rebates and discounts to direct customers for sales of its product that are earned based upon sales volume.

These amounts, which are earned based on calendar year sales volume, are recorded as a reduction of sales as earned.

The transaction prices for government contracts are dependent on the type of contract and are outlined in each contract.

Allocate Transaction Price to Performance Obligations - The transaction price for the performance obligation is based on the purchase orders received for both direct customers and on the type of contract and are outlined in each contract.

The transaction prices for government contract performance obligations are dependent on the type of contract and are generally based on costs incurred.

Recognize Revenue as Performance Obligations are Satisfied - The Company satisfies its performance obligation to direct customers and distributors/strategic partners generally upon shipment of the products.

The Company satisfies its

performance obligations on government contracts generally upon incurring costs on each contract.

The Company records deferred revenue related to fixed price government contracts to the extent that billings exceed costs incurred.

Research and Development

13 unchanged sentences

The Company follows the accounting standards associated with uncertain tax provisions.

The Company had no unrecognized tax benefits as of December 31, 2022 or 2021.

The Company is accounting for an uncertain tax position of approximate $ 2.1 million for the year ended December 31, 2023.

The Company had no unrecognized tax benefits as of December 31, 2022.

The Company files tax returns in the U.S.

2 unchanged sentences

CytoSorbents Europe GmbH, CytoSorbents Switzerland GmbH, CytoSorbents Poland Sp.

z.o.o., CytoSorbents UK Limited, CytoSorbents Medical UK Limited and CytoSorbents France file an annual corporate tax return, a VAT return and a trade tax return in Germany, Switzerland, Poland, France and the United Kingdom, respectively.

z.o.o., CytoSorbents UK Limited, CytoSorbents Medical UK Limited and CytoSorbents France SAS file an annual corporate tax return, a VAT return and a trade tax return in Germany, Switzerland, Poland, France and the United Kingdom, respectively.

Use of Estimates

1 unchanged sentence

Actual results could differ from these estimates.

The valuation of options granted, allowance for doubtful accounts and recoverability of patents are significant estimates in these consolidated financial statements.

The valuation of options granted, allowance for credit losses and recoverability of patents are significant estimates in these consolidated financial statements.

Concentration of Credit Risk

The Company maintains cash balances, at times, with financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation.

Beginning in April of 2023, the Company joined the IntraFi network, and established an Insured CashSweep (“ICS”) account whereby all cash that was previously held in the Company’s money market account at Bridge Bank is swept daily in increments of less than $250,000 and deposited in a number of IntraFi’s 4,000 member banks.

This arrangement provides FDIC insurance coverage for all of the cash balances previously held in the money market account, which represents all of the cash and cash equivalents held at Bridge Bank.

This arrangement excludes the restricted cash balances.

Management monitors the soundness of these institutions in an effort to minimize its collection risk of these balances.

2 unchanged sentences

(See Note 3 for further information relating to the Company’s revenue.)

As of December 31, 2022, two distributors accounted for approximately 27 % of outstanding grants and accounts receivables.

As of December 31, 2023, one distributor accounted for approximately 19 % of outstanding grants and accounts receivables.

For the years ended December 31, 2022, 2021 and 2020, no agency, distributor/strategic partners or direct customer represented more than 10 % of the Company’s total revenue.

As of December 31, 2022, two distributors accounted for approximately 27 % of outstanding grants and accounts receivables.

For the years ended December 31, 2023, 2022 and 2021, no agency, distributor/strategic partner or direct customer represented more than 10 % of the Company’s total revenue.

Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to their short-term nature.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815 “Derivatives and Hedging” (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.

As the warrants issued upon the closing of the Company’s December 13, 2023 Offering meet the criteria for equity classification under ASC 815, the warrants are classified as equity as of December 31, 2023.

Net Loss per Common Share

12 unchanged sentences

Effect of Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (the “FASB”), issued Accounting Standards Update No.

2021-10 entitled, “Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance” (the “ASU”).

This ASU will require enhanced disclosures related to the Company’s contracts with the U.S.

The ASU is effective for annual periods beginning after December 15, 2021.

The Company implemented the provisions of this ASU during 2022.

In June 2016, the FASB, issued ASU No.

2 unchanged sentences

This ASU provides guidance on the calculation of credit losses, which includes the allowance for doubtful accounts on trade accounts receivable.

The updated guidance is effective for public entities for fiscal years beginning after

December 15, 2022.

The Company implemented the updated guidance as of January 1, 2023, and this did not have significant impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”).

ASU2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S.

The ASU’s amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.

The Company will adopt the provisions of ASU 2020-06 on January 1, 2024.

This is not expected to have a material impact on the Company’s financial statements.

In December 2023, the FASB issued ASU No.

2023-09 entitled “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

This ASU provides guidance related to additional disclosures that will be required related to income taxes.

The updated guidance is effective for public entities for fiscal years beginning after December 15, 2024.

The Company is evaluating the impact of the updated guidance but does not believe that this will have a significant impact on its financial statements.

This ASU will result in additional disclosures in the Company’s consolidated financial statements related to income taxes in 2025.

The following table disaggregates the Company’s revenue by customer type and geographic area for the year ended December 31, 2023:

33 unchanged sentences

(1) sales of the CytoSorb device and related device accessories and (2) grant income from contracts with various agencies of the United States government.

Both of these revenue streams are within the scope of this accounting pronouncement.

The following is a brief description of each revenue stream.

13 unchanged sentences

The Company has a formal written contract with each distributor/strategic partner.

These contracts have terms ranging from 1 to 5 years in length, with three years being the typical term.

These contracts have terms ranging from one to five years in length, with three years being the typical term.

In addition, certain distributors are eligible for volume discount pricing if their unit sales are in excess of the base amount in the contract.

28 unchanged sentences

Contract receivables represent balances due from product sales to distributors amounting to $ 3,270,724 and $ 2,944,031 at December 31, 2023 and 2022, respectively, and billed and unbilled amounts due on government contracts amounting to $ 575,547 and $ 878,421 at December 31, 2023 and 2022, respectively.

Contract receivable amounted to $ 3,000,708 as of January 1, 2022.

Contract liabilities represent the value of free of charge goods and credit rebates earned in accordance with the terms of certain direct customer agreements, which amounted to $ 196,322 and $ 178,134 at December 31, 2023 and 2022, respectively, and deferred grant revenue related to the billing on fixed price government contracts in excess of costs incurred, which amounted to $ 1,376,819 and $ 1,516,772 at December 31, 2023 and 2022, respectively.

Contract liabilities amounted to $ 2,251,177 as of January 1, 2022.

PROPERTY AND EQUIPMENT, NET:

Property and equipment - net, consist of the following:

Property and equipment - net, consist of the following as of December 31,:

Depreciation/

11 unchanged sentences

Less accumulated amortization of patents issued

( 1,021,233 )

Security deposits

23 unchanged sentences

The proceeds of Term Loans were used for general business requirements in accordance with the Amended and Restated Loan and Security Agreement.

On December 4, 2020 (the “Third Amendment Closing Date”), the Company closed on the Third Amendment (the “Third Amendment”) of its Amended Loan and Security Agreement with Bridge Bank.

On December 4, 2020 (the

“Third Amendment Closing Date”), the Company closed on the Third Amendment (the “Third Amendment”) of its Amended Loan and Security Agreement with Bridge Bank.

Under the terms of the Amendment, the Company repaid the outstanding principal balance of its existing $ 15 million term loans and simultaneously received a commitment from Bridge Bank to provide a new term loan of $ 15 million, if needed.

5 unchanged sentences

The Sixth Amendment further extends the draw period to March 24, 2023.

Therefore, no further draws are available as of the date of this filing.

The Fourth Amendment provides a tranche of term loans (the “Term C Loans”) in the aggregate amount of $ 15 million, which are available for the Company to draw down at its sole discretion in three tranches of $ 5 million each at any time during the period commencing on the Fourth Amendment Date and ending on the earlier of (i) December 31, 2022 and (ii) the occurrence of an Event of Default (as defined in the Amended Loan and Security Agreement).

4 unchanged sentences

The interest-only period will be further extended through June 2024 provided the Company has met both the required reserves test and the seventy-five percent test, as set forth in the Fourth Amendment, as of November 30, 2023.

Commencing on January 1, 2024, if the Company does not meet both the required reserves test and the seventy-five percent test, the Company shall make equal monthly payments of principal of $ 208,333 , together with accrued and unpaid interest.

Commencing on July 1, 2024, if the Company meets both the required reserves test and the seventy-five percent test, the Company shall make equal monthly payments of principal of $ 277,778 , together with accrued and unpaid interest.

In either event, all unpaid principal and accrued and unpaid interest shall be due and payable in full on December 1, 2025.

The Company did not meet the required reserves test as of November 30, 2023, and accordingly, commencing on January 1, 2024, the Company is required to make equal monthly payments of principal of $ 208,333 , together with accrued and unpaid interest, through December 1, 2025 at which time the loan balance will be paid in full.

On the Fourth Amendment Closing Date, the Company was required to pay a non-refundable closing fee of approximately $ 18,750 , which was amortized as a monthly charge to interest expense.

1 unchanged sentence

In addition, the Amended and Restated Loan and Security Agreement requires the Company to pay a non-refundable final fee equal to 2.5 % of the principal amount of the Term Loan funded upon the earlier of the (i) the maturity date or (ii) termination of the Term Loans via acceleration or prepayment.

This final fee is being accrued and charged to interest expense over the term of the loan.

For the year ended December 31, 2023, the Company recorded interest expense of approximately $ 43,000 related to the final fee.

The Term Loans are evidenced by a secured promissory note issued to the Bank by the Company.

If the Company elects to prepay the Term Loans pursuant to the terms of the Amended and Restated Loan and Security Agreement, it will owe a prepayment fee to the Bank, as follows:

(1) for a prepayment made on or after the funding date of a Term Loan through and including the first anniversary of such funding date, an amount equal to 2.0 % of the principal amount of such Term Loan prepaid;

(2) for a prepayment made after the first anniversary of the funding date of a Term Loan through and including the second anniversary of such funding date, an amount equal to 1.5 % of the principal amount of such Term Loan prepaid;

and (3) for a prepayment made after the second anniversary of the funding date of a Term Loan, an amount equal to 1.0 % of the principal amount of such Term Loan prepaid.

The Company’s and CytoSorbents Medical, Inc.’s obligations under the Amended and Restated Loan and Security Agreement are joint and severable and are secured by a first priority security interest in favor of the Bank with respect to the Company’s Shares (as defined in the Amended and Restated Loan and Security Agreement) and the Borrower’s Collateral (as defined in the Amended and Restated Loan and Security Agreement, which definition excludes the Borrower’s intellectual property and other customary exceptions).

3 unchanged sentences

(b) a merger or consolidation of the Borrower into or with another person or entity, where the holders of the Borrower’s outstanding voting equity securities as of immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity as of immediately following the consummation of such merger or consolidation;

(c) a transaction or a series of related transactions in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of the Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of the Borrower, who did not have such power before such transaction;

outstanding of the Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of the Borrower, who did not have such power before such transaction;

or (d) the closing price per share for the Company’s common stock on the Nasdaq Capital Market being the greater of (i) 70 % or more over $ 7.05 , the closing price of the Company’s common stock on March 29, 2018 (after giving effect to any stock splits or consolidations effected after the date thereof) for five successive business days, or (ii) at least 26.13 % more than the average price of Company’s common stock for the 365-day period ending on the date of the funding of the Term B Loan.

8 unchanged sentences

Principal amount

Accrued final fee

Less Current maturities

19 unchanged sentences

In addition, due to the six months of rent abatement and annual base rent escalations during the remaining lease term that commenced on September 30, 2021, the Company will recognize rent expense on this lease on a straight-line basis over the remaining term of the lease for the difference between the rent expense recognized and the required payments under the lease.

In April 2021, the Company entered into a Twentieth Amendment to Lease with the landlord at the existing Monmouth Junction facility which became effective May 31, 2021.

This amendment extended the term of the lease for the Company’s previous facility to May 31, 2022.

The Company’s base rent was approximately $ 35,000 per month.

In addition, the Company was obligated to pay monthly operating expenses of approximately $ 30,000 per month.

Under the terms of this amendment, the Company vacated a portion of the space as of May 31, 2022.

The Company continued to lease the remaining space until December 31, 2022, at which time the lease terminated and the Company vacated the space.

The Company’s base rent for the remaining space was approximately $ 20,000 per month.

Monthly operating expenses were approximately $ 11,000 per month.

In addition, the Company agreed to increase its security deposit by approximately $ 54,000 to a total of $ 150,000 .

At the end of the lease term, the entire security deposit was paid to the landlord for the purpose of making any needed repairs to the vacated premises, and the Company has no further obligation to pay for repairs to the vacated premises.

Effective April 1, 2021, the Company adjusted its incremental borrowing rate to the incremental borrowing rate used in the College Road lease and recalculated the right of use asset and lease liability under the amended terms of this lease.

In addition, the Company also adjusted the incremental borrowing rate and related right of use asset and lease liability on the existing Germany office lease effective April 1, 2021.

In September 2021, the Company extended its two operating leases for its office facility in Germany.

23 unchanged sentences

Present value discount

( 10,827,026 )

For the years ended December 31, 2023, 2022 and 2021, operating cash flows paid in connection with operating leases amounted to approximately $ 2,403,000 , $ 2,935,000 and $ 1,968,000 , respectively.

33 unchanged sentences

We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Currently, the Company is not accounting for any uncertain tax positions.

Currently, the Company is accounting for $ 2.1 million relating to uncertain tax positions for the year ended December 31, 2023.

Due to The Tax Cuts and Jobs Act of 2017 (TCJA) there was a change in the deductibility of research and experimental expenditures that took effect for taxable periods that begin after December 31, 2021.

23 unchanged sentences

( 3,542,958 )

( 3,885,225 )

Net deferred tax assets

11 unchanged sentences

Rate change and true-up

Uncertain tax positions

Change in valuation allowance

1 unchanged sentence

Effective income tax rate

A reconciliation of the unrecognized tax benefit balances is as follows:

Year Ended December 31,

Balance at beginning of the year

Increase for tax positions of prior years

Increase for tax positions in current year

Decrease for tax positions due to payment or settlement

Decrease for tax positions due to limitation expirations

The total amount of unrecognized tax benefits that could affect our effective tax rate, if recognized, was $ 2.1 million and $ 0 as of December 31, 2023 and 2022, respectively.

The Company and its subsidiaries file income tax returns in the U.S.

federal jurisdiction and New Jersey.

With few exceptions, we are no longer subject to U.S.

federal, state and local, or non-U.S.

income tax examinations by tax authorities for years before 2018, although NOL carryforwards and tax credit carryforwards from any year are subject to examination and adjustment for at least three years following the year in which they are fully utilized.

As of December 31, 2023, no significant adjustments have been proposed relative to our tax positions.

Although the outcome and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits will not change during the next 12 months.

However, changes in the occurrence, expected outcomes and timing of those events could cause the Company’s current estimate to materially change in the future.

For year ended December 31, 2023, there are no interest and penalties relating to our uncertain tax positions.

COMMITMENTS AND CONTINGENCIES:

Payroll Tax Examination

In December 2021, the Company was notified that its European subsidiary, CytoSorbents Europe GmbH, would be subject to an audit of their payroll tax and social cost filings for the four-year period from 2018 through 2021.

The Company has determined that payroll taxes and social costs were not paid on certain employee expense reimbursements as is required by German tax rules.

Accordingly, the Company accrued approximately $ 598,000 as an estimate of this liability as of December 31, 2021.

In January 2023, the Company received an assessment from the German tax authorities for the payroll tax audit of approximately $ 90,000 .

In addition, it was determined that the Company would owe additional social security and VAT taxes related to this matter of approximately $ 83,000 .

Accordingly, the Company has adjusted its accrual related to this payroll tax audit to approximately $ 173,000 as of December 31, 2022.

This liability is included in accrued expenses and other current liabilities in the consolidated balance sheet as of December 31, 2022.

The expense related this examination is included in selling, general and administrative expenses on the consolidated statements of operations and comprehensive loss.

Employment Agreements

On July 30, 2019, CytoSorbents Corporation entered into amended and restated executive employment agreements with its principal executives, Dr.

Chan, Chief Executive Officer, Vincent Capponi, President and Chief Operating Officer, and Kathleen P.

Bloch, Chief Financial Officer.

Chan, Chief Executive Officer, Vincent Capponi, President and Chief Operating Officer.

Each of the agreements has an initial term of three years and was retroactively effective as of January 1, 2019.

1 unchanged sentence

Efthymios Deliargyris, who began employment as Chief Medical Officer on May 1, 2020, with an initial term that expired on December 31, 2021.

After the expiration of the initial terms, the employment agreements will automatically renew for additional terms of one year unless either party provides written notice of non-renewal at least 60 days prior to a renewal.In January 2022, these employment agreements automatically renewed for an additional 1 year .

After the expiration of the initial terms, the employment agreements will automatically renew for additional terms of one year unless either party provides written notice of non-renewal at least 60 days prior to a renewal.In January 2023, these employment agreements automatically renewed for an additional one year .

The foregoing employment agreements each provide for base salary and other customary benefits which include participation in group insurance plans, paid time off and reimbursement of certain business-related expenses, including travel and continuing educational expenses, as well as bonus and/or equity awards at the discretion of the Board of Directors.

1 unchanged sentence

The agreements also provide for certain benefits in the event of a “Change of Control” of the Company, as defined in each agreement.

On September 30, 2022, Ms.

Bloch notified the Company of her intention to retire effective March 31, 2023.

A search has been initiated for Ms.

Bloch’s replacement.

Bloch and the Company expect to enter into a consulting arrangement under which Ms.

Bloch will continue to provide services to the Company in a limited capacity following the effective date of her retirement.

Effective March 31, 2023, Ms.

Bloch retired from her role as Chief Financial Officer of the Company.

Bloch’s employment agreement expired on March 31, 2023, upon her retirement from the Company.

In connection with Ms.

Bloch’s retirement, the Company and Ms.

Bloch entered into a Consulting Agreement, dated as of March 31, 2023 (the “Consulting Agreement”), pursuant to which Ms.

Bloch will serve as a consultant to the Company and as the Company’s Interim Chief Financial Officer.

On September 18, 2023, the Company entered into a new Employment Agreement with Ms.

Bloch pursuant to which Ms.

Bloch will continue to serve as the Company’s Chief Financial Officer.

Bloch’s service under the Employment Agreement has replaced and terminated the Consulting Agreement disclosed above.

The Employment Agreement provides for base salary and other customary benefits which include participation in group insurance plans, paid time off and reimbursement of certain business-related expenses, including travel and continuing educational expenses, as well as bonus and/or equity awards at the discretion of the Board of Directors.

In addition, the agreement provides for certain termination benefits in the event of termination without “Cause” or voluntary termination of employment for “Good Reason”, as defined in each agreement.

Unless terminated sooner by either the Company or Ms.

Bloch, the Employment Agreement will remain in effect until December 31, 2025, and thereafter, as mutually agreed between the Company and Ms.

On July 19, 2023, the Company announced the appointment of Alexander D’Amico as Chief Financial Officer effective August 7, 2023.

The Company entered into an executive employment agreement with Mr.

D’Amico with an initial term commencing on August 7, 2023 and expiring on December 31, 2025.

On August 28, 2023, the Company and Mr.

D’Amico mutually agreed to terminate Mr.

D’Amico’s employment with the Company.

D’Amico and the Company entered into a Mutual Termination and Release Agreement (the “Termination and Release Agreement”), pursuant to which the Company and Mr.

D’Amico have mutually agreed to terminate the Employment Agreement in its entirety.

In addition, under the Termination and Release Agreement, the Company and Mr.

D’Amico have agreed to customary and mutual non-disparagement and release provisions, payment of specific accrued expenses, and no severance payments or vesting of equity.

The Company is, from time to time, subject to claims and litigation arising in the ordinary course of business.

The Company intends to defend vigorously against any future claims and litigation.

The Company is not currently a party to any legal proceedings.

The Company has settled a litigation matter.

As part of the settlement agreement, the Company paid a total of $ 280,000 in November 2023 to settle this matter in return for a release of all claims against the Company.

The expense related to this settlement is included in legal financial and other consulting expenses on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

On March 5, 2024, Danielle Greene, a former employee, filed a complaint against us in the Superior Court of New Jersey, Law Division, Mercer County, alleging breach of the New Jersey Conscientious Employee Protection Act ("CEPA").

The complaint specifically alleges that we violated the provisions of the CEPA by allegedly terminating Ms.

Greene in retaliation for complaining about certain business practices.

We dispute these allegations and intend to vigorously defend against them, but there can be no assurance as to the outcome of the litigation.

Royalty Agreement

8 unchanged sentences

This initial royalty rate was determined based on certain assumptions regarding the percentage of the Company’s sale of CytoSorb products that are used with the Fresenius critical care platforms in the intensive care unit outside of the United States but is subject to adjustment if the Company determines that the underlying assumptions have changed significantly.

For the year ended December 31, 2022, the Company did not record any expense related to this agreement as Fresenius did not commence any marketing activities as defined by the agreement.

For the years ended December 31, 2023 and 2022, the Company did not record any expense related to this agreement as the launch of this program is expected to occur in 2024.

License Agreement

1 unchanged sentence

Under the terms of the agreement, the Company has agreed to pay license fees of 2.5 % to 5 % on the sale of certain of its products if and when those products are sold commercially for a term not greater than 18 years commencing with the date of the agreement.

For the years ended December 31, 2022, 2021 and 2020 per the terms of the license agreement, the Company recorded licensing expenses of

approximately $ 1,416,000 , $ 1,988,000 and $ 1,954,000 , respectively.

For the years ended December 31, 2023, 2022 and 2021 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 1,233,000 , $ 1,416,000 and $ 1,988,000 , respectively.

These expenses are included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.

5 unchanged sentences

The amended and restated certificate of incorporation increased the number of shares of common stock authorized for issuance from 50,000,000 shares to 100,000,000 shares.

December 13, 2023 Offering

On December 13, 2023, the Company closed on a registered direct offering for the sale, directly to investors, of 7,733,090 registered shares of common stock and warrants to purchase up to 2,706,561 shares of common stock (the “Offering”).

Each share of common stock and accompanying warrant to purchase up to 0.35 shares of common stock, were sold together for a combined purchase price of $ 1.33 , for an aggregate purchase price of approximately $ 10,285,000 .

After deducting transaction fees and expenses payable by the Company in connection with the Offering, the Company received net proceeds of approximately $ 9,785,000 , excluding any proceeds that may be received upon the exercise of the warrants.

Each warrant is immediately cash exercisable at an exercise price of $ 2.00 per share and will expire on the fifth anniversary of the issue date.

The Company’s executive officers, directors, and certain non-executive officer employees of the Company also participated in the Offering with a combined investment of $ 435,000 .

Shelf Registration

6 unchanged sentences

The Company is required to pay the Agent a commission of up to 3.0 % of the gross proceeds from the sale of the shares of the Company’s common stock sold thereunder, if any.

There were no sales pursuant to the Amended Sale Agreement during the years ended December 31, 2022 and 2021, respectively.

In addition, during the year ended December 31, 2021, the Company paid approximately $ 90,000 related to the Amended Sale Agreement.

There were no sales pursuant to the Amended Sale Agreement during the year ended December 31, 2022.

During the year ended December 31, 2023, the Company sold 2,656,464 shares pursuant to the Sale Agreement, at an average selling price of $ 1.76 per share, generating net proceeds of approximately $ 4,532,000 .

In addition, during the years ended December 31, 2023 and 2022, the Company paid approximately $ 61,000 and $ 45,000 , respectively, in expenses related to the Sale Agreement.

Stock Option Plans

2 unchanged sentences

A total of 13,400,000 and 2,400,000 shares of common stock are reserved for issuance under the 2014 Plan and the 2006 Plan, respectively.

As of December 31, 2022, there were shares remaining to purchase approximately 3,713,000 and 258,000 units of common stock reserved under the 2014 Plan and the 2006 Plan, respectively.

The 2014 and 2006 Plans as well as grants issued outside of the Plan are administered by the Compensation Committee of the Board of Directors (the “Compensation Committee”).

As of December 31, 2023, there were approximately 647,000 and 320,000 shares of common stock remaining for issuance under the 2014 Plan and the 2006 Plan, respectively.

The 2014 and 2006 Plans as well as grants issued outside of the Plans are administered by the Compensation Committee of the Board of Directors (the “Compensation Committee”).

The Compensation Committee is authorized to select from among eligible employees, directors, advisors and consultants those individuals to whom incentives are to be granted and to determine the number of shares to be subject to, and the terms and conditions of the options.

The Compensation Committee is also authorized to prescribe, amend and rescind terms relating to options granted under

The Compensation Committee is also authorized to prescribe, amend and rescind terms relating to options granted under the Plans.

Generally, the interpretation and construction of any provision of the Plans or any options granted hereunder is within the discretion of the Compensation Committee.

1 unchanged sentence

Only employees of the Company are eligible to receive ISOs, while employees and non-employee directors, advisors and consultants are eligible to receive options, which are not ISOs, i.e., “Non-Qualified Options.” Because the Company has not obtained shareholder approval of the 2006 Plan, all options granted thereunder to date are “Non-Qualified Options” and until such shareholder approval is obtained, all future options issued under the 2006 Plan will also be “Non-Qualified Options.”

In December 2014, the Company’s received shareholder approval authorizing the Board of Directors to implement the form, terms and provisions of the 2014 Plan.

In December 2014, the Company received shareholder approval authorizing the Board of Directors to implement the form, terms and provisions of the 2014 Plan.

Accordingly, any options issued to employees under the 2014 Plan will be ISOs within the meaning of Section 422 of the Internal Revenue Code.

5 unchanged sentences

Outstanding, December 31, 2021

( 1,270,155 )

Outstanding, December 31, 2022

Outstanding, December 31, 2023

During the third quarter of 2023, management identified a misstatement related to the number of granted options within the option roll forward activity disclosure for the year ended December 31, 2022.

The options granted were properly disclosed within the stock-based compensation footnote however;

the number was incorrectly omitted from the tabular disclosure.

The Company assessed the materiality of these misstatements on prior period financial statements in accordance with U.S.

Securities and Exchange Commission Staff Accounting Bulletin No.

99, Materiality, codified in ASC 250, Presentation of Financial Statements, and concluded that this misstatement was not material to any prior annual or interim period.

As such, the Company has revised the 2022 options granted and the options outstanding amounts as of December 31, 2022 to include the 1,365,000 options granted and disclosed.

The fair value of each stock option was estimated using the Black-Scholes pricing model which takes the following factors into account.

Current Price

Stock and its

Expected Life

26 unchanged sentences

Awards of Stock Options:

On July 7, 2023, the Board of Directors granted options to purchase 1,138,750 shares of common stock to the Company’s employees which will be awarded based upon each employee’s 2023 individual performance evaluation.

Once awarded, these options will vest one quarter on the first anniversary of the grant date, one quarter on the second anniversary of the grant date, one quarter on the third anniversary of the grant date and one quarter on fourth anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 2,665,000 .

The Company has recorded approximately $ 260,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 56,130 shares of common stock to certain of the Company’s employees.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 178,000 .

The Company has recorded approximately $ 59,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 100,000 shares of common stock to members of the Company’s Board of Directors.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 234,000 .

The Company has recorded approximately $ 113,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 20,000 shares of common stock to a named executive officer of the Company.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 47,000 .

The Company has recorded approximately $ 23,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 424,000 shares of common stock to certain senior managers of the Company.

These options will vest one half on the first anniversary of the grant date, one quarter on second anniversary of the grant date, one quarter on third anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 992,000 .

The Company has recorded approximately $ 285,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 182,000 shares of common stock to the named executive officers and certain senior managers of the Company.

These options were awarded as a one-time award to each executive officer or senior manager in order to account for lost wages resulting from the salary freezes implemented by the Company over the preceding two years and to account for recent inflation.

These options will vest one half on the first anniversary of the grant date, one half on second anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 426,000 .

The Company has recorded approximately $ 104,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 115,000 shares of common stock to a senior manager of the Company.

These options will vest only upon the achievement of certain milestones pursuant to the terms of the Company’s existing 2022-2025 performance pool in place for the Company’s management team.

The grant date fair value of these unvested options amounted to approximately $ 320,000 .

As of December 31, 2023, none of these milestones has been met.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

On July 10, 2023, in connection with his appointment as Chief Financial Officer, Mr.

Alexander D’Amico was awarded options to purchase 70,000 shares of common stock which will vest as follows:

25,000 options upon the six-month anniversary of the date of grant and 15,000 options upon each of the first, second and third anniversaries of the date of grant.

D’Amico was also granted options to purchase 215,000 shares of common stock that will vest only upon the achievement of certain milestones pursuant to the terms of the Company’s existing 2022-2025 performance pool in place for the Company’s management team.

All of these options were forfeited upon the termination of Mr.

D’Amico’s employment agreement.

On August 10, 2022, the Board of Directors granted options to purchase 1,163,800 shares of common stock to the Company’s employees which will be awarded based upon each employee’s 2022 individual performance evaluation.

1 unchanged sentence

The grant date fair value of these unvested options amounted to approximately $ 1,381,000 .

The Company has recorded approximately $ 180,440 in stock option expense related to these options for the year ended December 31, 2022.

The Company has recorded approximately $ 311,000 , and $ 180,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

On August 10, 2022, the Board of Directors granted options to purchase 772,905 shares of common stock to the Company’s employees.

1 unchanged sentence

The grant date fair value of these unvested options amounted to approximately $ 917,000 .

The Company has recorded approximately $ 89,662 in stock option expense related to these options for the year ended December 31, 2022.

The Company has recorded approximately $ 201,000 , and $ 90,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

On August 10, 2022, the Board of Directors granted options to purchase 113,850 shares of common stock to members of the Company’s Board of Directors.

1 unchanged sentence

The grant date fair value of these unvested options amounted to approximately $ 135,000 .

The Company has recorded approximately $ 101,336 in stock option expense related to these options for the year ended December 31, 2022.

The Company has recorded approximately $ 34,000 , and $ 101,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

On August 10, 2022, the Board of Directors granted options to purchase 473,750 shares of common stock to certain senior managers of the Company.

1 unchanged sentence

The grant date fair value of these unvested options amounted to approximately $ 562,000 .

The Company has recorded approximately $ 160,944 in stock option expense related to these options for the year ended December 31, 2022.

The Company has recorded approximately $ 107,000 , and $ 161,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

On August 10, 2022, the Board of Directors granted options to purchase 1,365,000 shares of common stock to certain senior managers of the Company which will only vest upon the achievement of certain specific, predetermined milestones related to the Company’s long-term performance goals.

1 unchanged sentence

As of December 31, 2023, none of these milestones has been met.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

On April 12, 2021, the Board of Directors granted options to purchase 1,323,400 shares of common stock to the Company’s employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2021 operations.

Once awarded, these options will vest in four equal tranches, the first tranche vesting on the date of the award.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, and 2022.

On April 12, 2021, the Board of Directors granted options to purchase 1,323,400 shares of common stock to the Company’s employees which were designed to vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2021 operations.

Once awarded, these options were designed to vest in four equal tranches, the first tranche vesting on the date of the award.

The grant date fair value of these unvested options amounted to approximately $ 7,042,000 .

On March 1, 2022, Board of Directors determined that the Company met approximately 19 % of these milestones, and accordingly, the Company has recorded $ 320,000 , and $ 314,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

On February 28, 2020, the Board of Directors granted options to purchase 1,114,325 shares of common stock to the Company’s employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2020 operations.

The grant date fair value of these unvested options amounted to approximately $ 3,883,000 .

On April 12, 2021, Board of Directors determined that the Company met approximately 88 % of these milestones, and accordingly, the Company has recorded $ 951,000 and $ 1,070,000 in stock option expense related to these options for the years ended December 31, 2022, and 2021, respectively.

During the years ended December 31, 2023, 2022, and 2021, 281,000 , 196,900 and 281,880 options were awarded to newly hired employees, respectively, in connection with their employment agreements.

Change in Control-Based Awards of Restricted Stock Units:

1 unchanged sentence

These restricted stock units will only vest upon a Change in Control of the Company, as defined in the Company’s 2014 Long-Term Incentive Plan.

The following table is a summary of these restricted stock units:

The following table is a summary the outstanding balance of these restricted stock units at the end of each of the past three calendar years::

Intrinsic Value

6 unchanged sentences

December 31, 2023

Due to the uncertainty over whether these restricted stock units will vest, which will only happen upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statement of operations and comprehensive loss through the year ended December 31, 2022.

Due to the uncertainty over whether these restricted stock units will vest, which will only happen upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statements of operations and comprehensive loss through the year ended December 31, 2023.

Performance-Based Awards of Restricted Stock Units:

Pursuant to a review of the compensation of the senior management of the Company and management’s performance in 2020, on February 28, 2020, the Board of Directors granted 168,100 restricted stock units to certain senior managers of the Company.

These awards were valued at approximately $ 1,014,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the years ended December 31, 2022 and 2021, the Company recorded (income) expense of approximately $( 65,000 ) and $ 528,000 , respectively, related to these restricted stock unit awards.

Pursuant to a review of the compensation of the senior management of the Company and management’s performance in 2021, on April 12, 2021, the Board of Directors granted 235,765 restricted stock units to certain senior managers of the Company.

These awards were valued at approximately $ 2,120,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the years ended December 31, 2022 and 2021, the Company recorded a charge of approximately $ 226,000 and $ 1,207,000 , respectively, related to these restricted stock unit awards.

For the years ended December 31, 2023 and 2022, the Company recorded (income) expense of approximately $( 245,000 ) and $ 226,000 , respectively, related to these restricted stock unit awards.

On August 10, 2022, certain named executive officers and senior managers were granted 288,500 restricted stock units.

These awards were valued at approximately $ 563,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested (or will vest) one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the year ended December 31, 2022 and 2021, the Company recorded expense of approximately $ 260,000 and $ 0 , respectively, related to these restricted stock unit awards.

Additionally, in 2021 and 2020 certain employees were offered 91,750 restricted stock units as a condition of their employment.

These awards were valued at approximately $ 713,868 at the date of issuance.

46,750 of these restricted stock units vest upon the earlier of a Change in Control or one third after the second anniversary of the award, one third on the third anniversary of the award, and one third on the fourth anniversary of the award.

The other 45,000 of these restricted stock units vest upon the earlier of a Change in Control or four years from the date of the award.

For the years ended December 31, 2022 and 2021, the Company recorded (income) expense of approximately $( 16,000 ) and $ 178,000 , respectively, related to these restricted stock unit awards.

For the years ended December 31, 2023 and 2022, the Company recorded expense of approximately $ 267,000 and $ 260,000 , respectively, related to these restricted stock unit awards.

On July 7, 2023, certain named executive officers and senior managers were granted 250,000 restricted stock units.

These awards were valued at approximately $ 883,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and will vest two-third on the first anniversary of date of the grant, and one-third on the second anniversary of the date of the grant.

For the years ended December 31, 2023 and 2022, the Company recorded expense of approximately $ 213,000 and $ 0 , respectively, related to these restricted stock unit awards.

On September 18, 2023, a named executive officer was granted 45,000 restricted stock units.

This award was valued at approximately $ 89,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested (will vest) two-thirds on the date of the grant, one-third on the first anniversary of the date of the grant, and one-third on the second anniversary of the date of the grant.

For the years ended December 31, 2023 and 2022, the Company recorded expense of approximately $ 55,000 and $ 0 , respectively, related to these restricted stock unit awards.

On January 23, 2023, an employee was awarded 30,000 restricted stock units, as a condition of her employment.

These awards were valued at $ 64,200 at the date of issuance.

Also in 2023, 2,500 restricted stock units were forfeited.

The remaining unvested restricted stock awards will vest based upon a change of control or over the next two to four years, whichever occurs first.

For the year ended December 31, 2023 and 2022, the Company recorded (income) expense of approximately $ 80,000 and $( 16,000 ), respectively, related to these restricted stock unit awards.

On July 10, 2023, in connection with his appointment as Chief Financial Officer, Mr.

D’Amico was awarded 45,000 restricted stock units which were scheduled to vest one half on the first anniversary of the grant date and one half on the second anniversary of the grant date.

These restricted stock units were valued at approximately $ 157,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant.

Additionally, on July 10, 2023, Mr.

D’Amico was awarded 15,000 restricted stock units which were scheduled to vest either upon a Change of Control or will cliff vest on the second anniversary of the date of the grant, subject to Mr.

D’Amico’s continued service with the Company as of the applicable vesting date.

D’Amico’s resignation effective August 28, 2023, all 60,000 of his restricted stock units were forfeited.

The following table outlines the restricted stock unit activity for the year ended December 31, 2022:

1 unchanged sentence

Non-vested, December 31, 2023

As of December 31, 2022, the Company had no warrants outstanding.

As of December 31, 2023, the Company had 2,706,561 warrants outstanding related to the Company’s December 13, 2023 Offering.

These warrants are immediately cash exercisable at an exercise price of $ 2.00 per share and expire on December 13, 2028.

NET LOSS PER SHARE:

21 unchanged sentences

( 9,193,520 )

( 5,834,907 )

Net loss per share, basic and diluted

9 unchanged sentences

( 12,200,837 )

( 9,307,012 )

Net loss per share, basic and diluted

8 unchanged sentences

( 4,677,530 )

( 6,406,285 )

( 9,307,012 )

Net loss per share, basic and diluted

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures